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Financial results 3Q22

Our operational performance in the quarter was solid across our portfolio, with iron ore production reaching 90Mt and nickel and copper greatly increasing volumes.

“Our operational performance in the quarter was solid across our portfolio, with iron ore production reaching 90Mt and nickel and copper greatly increasing volumes. While the world is facing growing inflationary pressures, we remain focused on cost discipline and improving operational reliability. In Sudbury, our nickel production reached the highest quarterly level since 1Q21. We have also made progress in growing our supply of low-carbon nickel and other critical minerals for the energy transition. We have successfully delivered the first phase of the Copper Cliff Complex South Mine Project, which will nearly double ore production at Copper Cliff Mine. We achieved an important milestone in safety by delivering on the commitment to de-characterize 5 dams this year, totaling 12 structures so far, 40% of our program. We are delivering on our commitments to a safer and more reliable company.”,
commented Eduardo Bartolomeo, Chief Executive Officer



Business Results

• Proforma adjusted EBITDA from continued operations of US$ 4.002 billion, US$ 1.532 billion lower than 2Q22, mainly reflecting the decline in iron ore and nickel prices.
• Free Cash Flow from Operations of US$ 2.164 billion, stable q/q, reaching a cash conversion of 54% of the proforma EBITDA, versus 41% in 2Q22. The better cash conversion is mainly explained by the positive impact of working capital in the quarter and the lower income tax paid.

Disciplined capital allocation

• Capital expenditures of US$ 1.230 billion, including growth and sustaining investments, down US$ 63 million from 2Q22, mainly due to lower disbursement in Sol do Cerrado solar project due to equipment deliveries last quarter.
• Gross debt and leases of US$ 12.204 billion as of September 30, 2022, US$ 404 million lower q/q, largely due to bank loans amortization (US$ 300 million).
• Expanded Net Debt of US$ 13.3 billion, following a revision of its concept to be more aligned with market practices and better inform management on capital allocation decisions. The revision was to exclude operating and regulatory commitments yet keeping the target leverage range of US$ 10-20 billion.

Value creation and distribution

• Dividends and interest on capital of US$ 3.1 billion paid in September, as part of our Shareholder Remuneration Policy.
• Share buyback 25% complete, with around 126 million shares repurchased, for a total of US$ 1.9 billion, as of the date of this report.

Focusing and strengthening the core

• Approval of the Bahodopi nickel project, in July. The project is expected to start-up in 2025. The RKEF front of the project is a partnership between PTVI, Tisco & Xinhai with 73 ktpy capacity. PTVI ownership in the processing facility is 49%, and 100% of the mine. The mine will supply ore in accordance with PTVI equity stake in the JV. The project estimated CAPEX is around US$2.2 billion for the RKEF plant and around US$ 400 million for the mine.
• Reorganization of base metals operations in Brazil to combine copper and nickel assets into two entities, enabling more efficient processes and management. Both copper and nickel assets will continue to be consolidated and wholly owned by Vale.
• Approval for the construction of Onça Puma’s 2nd furnace, with an investment of US$ 555 million for a capacity addition of 12-15 ktpy of nickel. The project is expected to come online in 1H25.
• Opening of the first phase of the C$ 945 million Copper Cliff Complex South Mine Project in Sudbury, Canada. More than 12km of tunnels were developed to reunite the south and north shafts of Copper Cliff Mine. Phase 1 is expected to nearly double ore production at Copper Cliff Mine, adding roughly 10 ktpy of contained nickel and 13 ktpy of copper.

New pact with society

• The upstream dam de-characterization program is 40% concluded. Since 2019, Vale has eliminated 12 structures, 5 in 2022.
• Emergency-level removal of 5 dams in Minas Gerais. The structures also received the declaration of stability (DCE), attesting the safety of the structures. Since the beginning of the year, 7 structures had their emergency level revoked.
• Continued progress on the decarbonization agenda:
- Sol do Cerrado solar project is commissioning, and its electrification will ramp up until July 2023. The solar park is comprised of 17 sub-parks with an installed capacity of 766 MWp, one of the largest solar energy projects in Latin America. The project meets 16% of Vale’s electricity needs in Brazil in 2025 and is part of the initiatives to reduce 33% of scopes 1 and 2 emissions by 2030.
- Vale and the Germany steelmaker Stahl-Holding-Saar signed a Memorandum of Understanding to pursue solutions focused on carbon-neutral steelmaking process. Since 2021, Vale engaged with around 30 ironmaking clients representing approximately 50% of company’s Scope 3 emissions.
- Vale received in Brazil and Indonesia two battery-powered 72t off-road trucks. Emissions from off-road trucks running on diesel represent about 9% of Vale’s total scope 1 and 2 emissions. The electric trucks do not emit CO2 as they replace diesel with electricity from renewable sources. They also minimize the noise impact to the surrounding communities.

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